Nigerian Government Mulls Conversion of Foreign Currency in Domiciliary Accounts to Naira

Move Aims to Stabilize Naira Amidst Record Fall

The Federal Government of Nigeria is reportedly considering a policy shift that would involve converting foreign currencies in domiciliary accounts to naira.

Sources within the Presidency reveal that the plan is designed to stabilize the naira, which experienced a significant 24% fall against the dollar on Monday, reaching N1,348 per dollar.

The government is concerned about the forex scarcity and perceives the issue as one primarily affecting the elite. One source emphasized that the government won’t tolerate individuals hoarding foreign currencies at the expense of the naira, asserting that the move is both a political and economic imperative.

According to the source, over $30 billion is currently held in domiciliary accounts in Nigeria, a practice not observed in most countries. The government’s proposed solution involves converting these funds to naira at a rate determined by the Central Bank of Nigeria (CBN). The source suggests that individuals or companies with legitimate foreign currency earnings should be the only ones maintaining domiciliary accounts.

This potential policy shift contradicts statements made by the administration in September 2023, where they expressed a desire to attract funds from domiciliary accounts and Nigerians abroad into massive investments to boost various sectors of the economy.

The Minister of Finance, Mr Wale Edun, highlighted the substantial foreign exchange sources within Nigeria and the need to incentivize the repatriation of funds for domestic investment.

However, a branch manager from a Tier-1 bank in Lagos expressed reservations, stating that it might be too early to discuss compliance with the CBN directive.

The banking community questions the feasibility of putting a lien on funds in domiciliary accounts and the rate at which such funds would be converted to naira.

In a related development, the Central Bank of Nigeria has imposed a ban on banks and fintechs from engaging in International Money Transfer Operations, allowing them only to act as agents in the process, according to the ‘Guidelines on International Money Transfer Services in Nigeria,’ as reported on Thursday by REPORT AFRIQUE.

A meeting was held on Friday between the Minister of Finance, the Chairman of the Economic and Financial Crimes Commission, and the Governor of the Central Bank focused on enhancing the efficiency of the financial system and stabilizing the naira.

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